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It's also known as an engine retarder brake. It opens the exhaust valves in the cylinders after the compression cycle. This releases the trapped air, and slows the vehicle down.
Jake brake actually refers to the compression brakes made by Jacobs Vehicle Systems - however, it's become a generic term applied to all such systems.
Not all retarders are engine compression brakes - there are also exhaust brakes, which can be in place of, or in conjunction with, engine compression brakes. These close off the flow of exhaust, and tend to sound more like vacuum cleaners.
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